World View: Eurozone Plummets into Deflation

Eurozone plummets into deflation

Inflation versus deflation (Don Stott, Silver Bear Cafe)

The eurozone consumer price index (CPI) inflation rate fell to 0.8% inDecember, continuing a long string of steadily decreasing month aftermonth inflation rate reports. The “core inflation rate,” whichexcludes food and energy and so is less volatile, fell to 0.7%. Thefollowing table shows the core inflation rate reported in each ofseveral months in the last year:

This has been a fairly dramatic trend and demonstrates that deflationis becoming firmly lodged in the European economy.

For over ten years, mainstream economists have been predictinginflation or hyperinflation because central banks have had near-zerointerest rates and have been pumping trillions of “printed” dollarsinto the economy. For ten years, Generational Dynamics has beenpredicting a deflationary spiral. Once again, generationaltheory is right, and mainstream economists are wrong.Mainstream economists didn’t predict and can’t explain the tech bubbleof the 1990s, the real estate and credit bubble of the 2000s, or thefinancial crisis of 2007.

It was perfectly obvious that there was ahuge real estate bubble in the 2004-2007 time frame, as I wrote aboutmany times in that period. Mainstream economists, however, didn’t evenrecognize the bubble until around 2009, when they started saying, “Ohyeah, by the way, there was a real estate bubble in 2006. Let’s notdo that again.” Are you kidding me? Mainstream economists have noclue what’s going on, and they have no clue what will happen next year,except to assume that the same thing that happened last year willhappen next year, and you don’t need mainstream economists to makethat “prediction.”

The Wall Street stock market bubble has gotten so large that even somemainstream financial advisers are predicting a crash soon. (See, forexample, Estimating the Risk of a Market Crash, John P. Hussman Ph.D.)According to Friday’s Wall Street Journal, the S&P 500 Price/Earnings index (stockvaluations) on Friday (January 3) morning was 18.88, which isastronomical by historic standards, indicating that stocks are faroverpriced, and the stock market bubble is worse than ever.

As Europe spirals into deflation, it’s worth duly noting that Bank ofEngland Governor Mark Carney is expressing concern about China’scredit bubble. The Chinese credit system has grown to $24 trillionfrom $9 trillion in late 2008, equivalent to adding the entire UScommercial banking system.

Generational Dynamics predicts a continued deflationary spiral, and amassive world financial crisis, as a crisis in one country or marketcreates a chain reaction that affects the entire world. Reuters and Telegraph (London) and Telegraph (Dec 2013)

Measles spread feared in Central African Republic

Measles has broken out at the airport in the capital, Bengui, of theCentral African Republic. There are about 100,000 people there,mostly Christians fleeing Muslim Seleka militia attacks, squeezed likesardines into the area. Seleka militias have been going from house tohouse, killing young men. However, Christian groups are preparing aviolent revenge against the Muslims, leading to fears of a hugeregional war.

A month ago, there were only a few thousand camped out near theairport. The 100,000 people there now are among the 513,000 totalBangui citizens who have been driven from their homes. Across thecountry, about 2.2 million people have been made homeless, about halfthe total population.

Last March’s coup by a Seleka leader unleashed a wave of looting,rapes, and massacres by its fighters that degenerated into clashes withthe Christian militias. It’s become murder of neighbor againstneighbor, like the Rwanda genocide in 1994, or the Bosnian massacre in1995.

From the point of view of Generational Dynamics, Central AfricanRepublic is deep into a generational crisis era, and this conflict israpidly deteriorating into a full-fledged generational crisis warbetween Muslims and Christians. There are 1,600 French and 6,000African Union “peacekeepers” who are supposed to stop the slaughter,but a generational crisis war is an elemental force of nature that cansometimes be briefly delayed, but cannot be stopped until it reachesan explosive climax.